PHOTO COURTESY OF MILLER JOHNSON
by J. Scott Timmer
Miller Johnson
In early October 2010, Governor Granholm signed into law the Commercial Real Estate Broker’s Lien Act, which permits commercial real estate brokers to record liens on commercial real estate sales and leases to recover unpaid commissions.
Here’s a short summary of the key provisions:
—Liens can’t be recorded as to (1) vacant land zoned residential; (2) land with four or fewer residential units; and (3) land with more than four residential units, if the units are sold individually (condos).
—The lien can only be claimed by licensed brokers, and not their agents, employees or contractors.
—The lien attaches to the land if (1) the broker has a written commission agreement; (2) the broker is entitled to a commission under that agreement; and (3) the lien is recorded prior to the conveyance of the real estate.
—The recorded lien must be mailed to the owner of the land within 10 days of recording. If it isn’t, the lien is void.
—The Act has provisions for the establishment of an escrow account to hold funds until commission disputes can be resolved. An escrow that covers the lien claim extinguishes any broker lien.
—An action to enforce the lien must be commenced within one year after the lien attaches, or the lien terminates.? The lien may only be foreclosed judicially, through a lawsuit. The redemption period will be set by the court and will not exceed four months.
—The Act applies only to commission agreements signed after Oct. 5, 2010.
—Forms for recording and releasing a broker claim of lien are included in the Act.
—The Act has detailed provisions on when to timely record a lien on a sale, a lease, and an option.? Prior recorded liens and mortgages have priority over a broker lien.
—An owner can demand that a suit be filed on a lien within 30 days, and if it is not, the lien automatically terminates.
Miller Johnson real estate attorneys can answer questions on this significant change in the commercial real estate industry.
Scott Timmer is an attorney at Miller Johnson and has been practicing law since 1980. His practice is concentrated in matters relating to real estate, construction and creditors' rights. He can be reached at timmers@millerjohnson.com or 616-831-1787.
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